MRR / ARR Calculator — Net New MRR + ARR Annualisation

Billing spikes are not growth

A customer signs a $12,000 annual contract in January, and your accounting software records $12,000 of revenue that month. The board sees a huge January, a cliff in February, and then the pattern repeating every time an annual plan renews. That chart describes your billing cycle, not your business.

MRR exists to fix precisely this: the revenue actually recurring month to month, regardless of when the cash arrived. That $12,000 contract is $1,000 of MRR in each of twelve months — not a spike followed by nothing.

Predictable, recurring, normalised

Every word in the definition is doing work, and the test is simple: if it would not repeat next month without a new sale, it is not MRR.

So the following are real revenue but do not belong in it:

• One-time fees — setup, onboarding, implementation, training.
• Professional services — custom development and consulting, which do not renew by themselves.
• Usage overages that vary month to month. A $2,000 overage month followed by a $500 one is billing variance, not growth, and including it makes the trend line lie.
• Trials and free accounts, which are worth zero until they convert however promising they look.
• Hardware and reseller pass-through.

MRR should also reflect what customers actually pay after discounts rather than list price — and note that a discount with an end date means MRR will step up later without any new sale, which is worth knowing before you attribute that to your own efforts.

The four movements

This tool works on movement rather than a total: Net New MRR = New + Expansion − Contraction − Churn. It takes those four figures and shows whether recurring revenue grew or shrank in the period.

The reason to decompose it this way is that the net figure alone hides its own composition. Adding $30,000 of new business while losing $25,000 to churn nets to $5,000 — the same net result as adding $6,000 and losing $1,000, from a completely different and far less healthy business. Watching the gross components separately is what tells you whether you have a sales problem, a retention problem, or neither.

ARR is a run-rate, not last year

ARR is MRR × 12, and the distinction that matters is what that represents: a forward annualisation of your current run-rate, not the revenue you actually earned over the past twelve months. Those two figures are routinely confused and they are not the same. Trailing revenue is a historical fact that cannot change; ARR is a snapshot projected forward, and it drops the moment a large customer churns.

One further caveat: multi-currency contracts move ARR with exchange rates even when nothing about any customer changed, which is a good reason to read the trend rather than any single absolute.

MRR and ARR are operating metrics for internal visibility. Recognised revenue under formal accounting standards is calculated differently — that is a question for a bookkeeper or accountant, not for this tool.

Reading the result

Negative net new MRR means churn and contraction outweighed new business and expansion in that period. A single such month is not a crisis and most subscription businesses have them; a run of them says the losses are structural rather than seasonal.

The useful next question is which component caused it. The churn rate calculator separates customer churn from revenue churn, which distinguishes losing many small accounts from losing one large one. Then compare against the burn rate calculator to see whether recurring revenue is growing faster than spending, and the runway calculator for how much time that gap leaves.